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Lou Dobbs Tonight

Interview With Senator Byron Dorgan; Iraq Reconstruction Money Approved

Aired November 03, 2003 - 18:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


ANNOUNCER: This is LOU DOBBS TONIGHT for Monday, November 3. Sitting in for Lou Dobbs, John King.
JOHN KING, CNN ANCHOR: Good evening from the nation's capital.

Tonight: more death and destruction in Iraq after one of the deadliest attacks on U.S. soldiers since the war on Saddam Hussein began. Ambassador Timothy Carney, a former member of the reconstruction team, will tell us what he thinks is wrong with Bush administration policy and how the United States can succeed.

President Bush wins Senate approval for his spending plans in Iraq. But the coalition faces charges of cronyism, waste and corruption. Senator Byron Dorgan will give us his assessment.

An illegal alien fought with distinction as an Army private in Iraq. Has he won the right to become a U.S. citizen or should he be deported or? Lisa Sylvester will have that report.

And in our special report, "Wasted Minds: Our Failing Schools," at least one million American children are being schooled at home. And the numbers are growing sharply. Casey Wian will report.

But first tonight: more terrorist attacks in Iraq and a defiant promise from President Bush that America will never run from its mission there. The president made no direct reference to the attack on a Chinook helicopter that killed 16 Americans. But he said terrorists will not intimidate the United States.

In today's attacks, a land mine killed a soldier in Tikrit and a bomb killed a number of civilians in Karbala. The sharp escalation in attacks has raised new questions about the size of the U.S. force in Iraq and the coalition's tactics.

Senior Pentagon correspondent Jamie McIntyre reports -- Jamie.

JAMIE MCINTYRE, CNN MILITARY AFFAIRS CORRESPONDENT: Well, John, the Pentagon insists it does not need to increase the size of the U.S. force in Iraq, but will continue to try to accelerate the turnover of security to Iraqi forces. And U.S. commanders say they'll stick to their strategy of trying to hunt down the insurgents, this as the wounded, 16 of the 20 wounded from that Sunday helicopter shootdown, arrived in Ramstein, Germany, for medical treatment.

The soldiers were there -- 11 of them rushed into intensive care. Others were less seriously injured, this on a day when, as you said, President Bush was vowing, the United States will not cut and run in Iraq. In that attack yesterday, 16 soldiers died. According to eyewitnesses, the second of two shoulder-launched missiles fired from a stand of trees hit the CH-47 Chinook helicopter as it flew just a few hundred feet above the ground, according to Pentagon sources.

It is not clear that the missile actually detonated, but it did strike the rear engine and apparently started a chain reaction that plunged the helicopter into a fiery crash. Still, knocking these helicopters out of the sky, even with those heat-seeking missiles, is not easy. It requires you to be in the right place at the right time and have a little bit of training.

That said, these helicopters routinely fly very low in order to minimize the time that they're a target over a particular area. In this case, though, it appeared it gave the crew almost no time to react, to dispense flares, or take other countermeasures that might have been able to evade these heat-seeking missiles.

An investigation of the incident is under way to see exactly what happened and whether the crew should have done anything differently. But, at this point, U.S. commanders say they will continue to use helicopters to move around Iraq. It's still seen to be the fastest and safest way to get around. However, they will look at the flight patterns to make sure they're not becoming too predictable -- John.

KING: Well, Jamie, the Pentagon for some time has made rounding up and destroying these shoulder-launched missiles a priority, offering a $500 reward. That strategy does not appear to be working. Any other steps in the works, either increasing the reward or some other way to round up these missiles?

MCINTYRE: Well, there's no plans to increase the award that I'm aware of.

In fact, in Afghanistan, when the United States sent Stinger missiles there, they offered $150,000 for those U.S.-built Stinger missiles. They still didn't get all of them back. So that would be a probably very difficult way to try to get those missiles off. They're going to just try to continue to pursue the people who are opposing the coalition.

KING: Jamie McIntyre at the Pentagon, thank you.

And President Bush's comments on Iraq today were the latest in a series of remarks expressing his determination to stay the course in the war against Saddam Hussein. Today, Mr. Bush said the United States is carrying out a vital mission in Iraq and America, he said, will do whatever is necessary to make this country secure. The president also paid tribute to the Americans who have lost their lives in Iraq and the broader war on terror.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Some of the best have fallen in service to our fellow Americans. We mourn every loss. We honor every name. We grieve with every family. And we will always be grateful that liberty has found such brave defenders.

(APPLAUSE)

(END VIDEO CLIP)

KING: Troops on the Chinook helicopter came from at least four bases in the United States. Those bases are Fort Sill in Oklahoma, Fort Campbell in Kentucky, Fort Hood in Texas, and Fort Carson in Colorado.

Kris Osborn is at Fort Sill in Oklahoma.

Kris, the mood at the base tonight?

KRIS OSBORN, CNN CORRESPONDENT: Well, John, very somber, indeed.

There's a look in the eye of many on post here at Fort Sill which is one of both sadness and loss, of course, in part, because six of the 16 fatalities on board that Chinook that crashed in Iraq were based here. This is home to the 3rd Corps Artillery. And earlier today, the Pentagon, through DOD officials, released the names of four of the six who died.

They include, as mentioned earlier, Paul A. Velazquez. He's 29 from California. Sergeant Ross A. Pennanen from Shawnee, Oklahoma. He's 36 years old -- was. Staff Sergeant Joe N. Wilson from Crystal Springs, Mississippi. And Keelan Moss from Houston. He was 23.

Clearly, a tough blow dealt to the community here on post at Fort Sill. Earlier, the commanding general, along with others, emerged to the podium to talk about the loss. They included Brigadier General Formica.

Here is what he said.

(BEGIN VIDEO CLIP)

BRIG. GEN. RICHARD P. FORMICA, 3RD CORPS ARTILLERY COMMANDING GENERAL: We were tragically reminded yesterday that our soldiers are serving their country and its cause in harm's way in Iraq, that our ranks are filled with great soldiers and selfless, giving families. We are mindful of their sacrifice and we are proud of their service.

(END VIDEO CLIP)

OSBORN: Now, the two names, John, that have yet to be released have not been formally acknowledged or released by DOD officials, in part because the second and primary and secondary next of kin have yet to be notified.

That being said, there was also a lot of discussion about the families here, that many of the wives of those who died have come forward to talk about ways that they can help, along with chaplains and psychologists. And on the question of morale and how has this impacted soldiers on the ground and here on post, they say that they're very committed to their mission and they feel that this will not deter their resolve to move forward.

That being said, soldiers will both privately, and officials will acknowledge, that these mounting attacks, an escalation, they refer to it as, continues to take a psychological toll -- John.

KING: Kris Osborn, on a difficult day at Fort Sill, Oklahoma -- thank you, Kris.

The military has not yet released a complete list of the soldiers killed in yesterday's attack on the Chinook. As Kris Osborn reported, officials are still informing some of the families of the names of those who died. The soldiers came from communities across the whole of this country. One of the victims was Sergeant Ernest Bucklew. He was returning home for his mother's funeral in Pennsylvania.

Also among the dead was the helicopter's pilot, Lieutenant Brian Slavenas. He was a former Army paratrooper who was serving in the Illinois National Guard.

On Capitol Hill today, a spirited debate over the president's Iraq policy and his request for another $87 billion for the war and reconstruction in Iraq and Afghanistan. There was never any doubt the spending bill would pass. It was approved in a voice vote tonight. But the session gave senators an opportunity to express their frustrations.

Kitty Pilgrim is here with the report -- Kitty.

KITTY PILGRIM, CNN CORRESPONDENT: John, no one held back.

It was an absolute litany of sore points. But the one concept that most agreed on was that troops must be well supported, especially now.

(BEGIN VIDEOTAPE)

PILGRIM (voice-over): It was a complaint session that went all day.

SEN. FRITZ HOLLINGS (D), SOUTH CAROLINA: It is time that we speak out here, because, unless we are going to put in 100,000 to 150,000 more troops, U.S. troops, and get law and order into Iraq, into Baghdad, you're going to have operation meat grinder continue.

PILGRIM: Dick Durbin pointed out recent high casualties, saying the pilot of the Chinook helicopter shot down this weekend was from his state.

SEN. DICK DURBIN (D), ILLINOIS: Today, in one of the darkest hours, with some of the saddest news, it is difficult to look at this and understand how even money is going solve our problems.

PILGRIM: One billion dollars a week to sustain troops in Iraq was a number cited repeatedly in the debate. There was a lot of grousing about burdening the U.S. taxpayer, some outrage that Iraq would not partially finance reconstruction through oil sales. SEN. BYRON DORGAN (D), NORTH DAKOTA: They've got liquid gold under this sand, second largest reserves in the world.

PILGRIM: But, in the end, the Senate will support the $87 billion supplemental spending bill for military operations and reconstruction of Afghanistan and Iraq, $44 billion for operations and equipment, $18 billion for reconstruction and security, $17 billion for troop salaries and benefits -- for reconstruction of Iraq, a bit less than the president had asked for, although a bit more for Afghanistan. Some pointed out, the status of Iraq's debt is still unclear and made it clear what they wanted.

SEN. SUSAN COLLINS (R), MAINE: Saudi Arabia, France, Germany and Russia should not be repaid for debts incurred by Saddam Hussein, while the United States invests billions of its own dollars in reclaiming the country for the Iraqi people.

(END VIDEOTAPE)

PILGRIM: It was a session dominated by Democrats. There is still a lot of complaining about making this a grant and not partially a loan. But, in the end, that was not enough to change the outcome -- John.

KING: But, Kitty, this debate has been dominating Washington for weeks now. It is a major divide between the Democrats and this president. Why would they have only a voice vote? Why not go on with the yeas and nays?

PILGRIM: Well, John, it was pretty much a done deal. It was going to go through. Everyone took their opportunity to make their objections. And yet there is no real record whether they voted for or against. And that's to some people's benefit in the campaign season, isn't it?

KING: Yes, perhaps it will be.

Kitty Pilgrim, thank you very much.

A victory for the president in Congress, but overseas tonight, fresh evidence of lingering tensions with Germany over U.S. policy in Iraq. The German defense minister, Peter Struck, today questioned the legality of the war against Saddam Hussein and the quality of prewar U.S. intelligence. The German official's comments threaten to undermine efforts by President Bush and German Chancellor Gerhard Schroeder to mend their rift over Iraq.

The two leaders met, as you here, in New York back in September and said their differences were behind them.

Coming up: The Supreme Court will hear a key case about HMOs and patients rights. Peter Viles will report on what the impact on health care could be.

Then, Senator Byron Dorgan on postwar Iraq, the $87 billion price tag for initial reconstruction, and his concerns about how that money is being spent.

And "Wasted Minds: Our Failing Schools," all that week, a special report on weaknesses in the American education system -- tonight, Casey Wian on the growing practice of homeschooling.

(COMMERCIAL BREAK)

KING: The Supreme Court today agreed to hear two cases that could settle a controversial question: Can you sue your HMO for negligence? Federal law protects HMOs and other health care plans from most lawsuits. But now the high court has agreed to hear the issue.

Peter Viles has the report.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): The Supreme Court wading into a debate that Congress recently failed to settle: Should Americans have the right to sue their HMOs for negligence? The case at issue, a suit brought by a Texas man whose doctor wanted him to take the painkiller Vioxx, but his Aetna HMO required him to try two cheaper painkillers first.

One of those drugs gave him bleeding ulcers. And so he sued Aetna in state court. The key federal law at issue, the 1974 Health and Benefit Law signed by then President Ford known as ERISA. Under that law, employers and the multistate health plans they offer are protected from state negligence lawsuits. That's the way the health care industry wants it to stay. You can sue your doctor for negligence, but not your HMO.

SUSAN PISANO, AMERICAN ASSN. OF HEALTH PLANS: We're hoping there is clarification that an administrative decision is covered by ERISA and treatment decisions are different, and they're the ones that are covered by medical malpractice.

VILES: Consumer advocates and trial lawyers believe Congress had no idea that HMOs would grow into giants that dictate how to treat certain conditions, for example, no Vioxx until you've tried two other drugs first.

JOANNE DOROSHOW, CENTER FOR JUSTICE AND DEMOCRACY: It didn't see that managed care were going to be making these kinds of administrative decisions that resulted in malpractice occurring and that resulted in injuries and death. And, as a result of that, they didn't anticipate the need to sue.

ROBERT HUNTER, CONSUMER FEDERATION OF AMERICA: I think the law was interpreted by the Supreme Court in ways that nobody in Congress ever expected. This bill was supposed to be a consumer protection bill and it's ended up hurting consumers.

(END VIDEOTAPE)

VILES: Now, just to be clear on the issue of whether you can sue your HMO, under this federal law, you cannot sue for negligence in a state court, where you might win a huge verdict. You can sue in federal court, but there, the stakes are much lower. You can only win back the value of the service that is at issue, in this case, just the value of that Vioxx, rather than any punitive damages -- John.

KING: Peter Viles in New York, thank you, Peter.

Now, the Supreme Court today said it will not hear appeals from Alabama Chief Justice Roy Moore over the removal of a Ten Commandments monument from an Alabama courthouse. Controversy erupted after Judge Moore secretly placed the monument in the courthouse in the middle of the night. Moore was later suspended for ignoring a federal court order to remove that monument. But Judge Moore has no intention of backing down.

(BEGIN VIDEO CLIP)

JUDGE ROY MOORE, ALABAMA CHIEF JUSTICE: I want to tell you one thing. It is not over. We do not intend to stop educating the people of this country. And, indeed, when one third of our country rejects God, we're going to turn to the other two.

(END VIDEO CLIP)

KING: Federal regulators are cracking down on violators of the do-not-call list, that new database that is designed to protect consumers from unwanted telemarketing calls. The FCC wants to slap a $780,000 fine on AT&T. AT&T is accused of making 78 phone calls to 29 consumers who asked not to be called.

As of today, regulators have received more than 50,000 complaints about unwanted telemarketing calls since the national do-not-call registry went into effect. The AT&T fine would be the first major penalty.

Coming up: a soldier who broke the law in order to serve with the United States military in Iraq. Now he faces the consequences. Lisa Sylvester will report.

(COMMERCIAL BREAK)

KING: Tonight, the Army faces a critical decision in the controversial case of one soldier who fought in Iraq. The private earned the respect of his peers and the admiration of his commanders. But it turns out he was breaking the law. Now he faces not just discharge, but deportation.

Lisa Sylvester has the report.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): For four months, Private Juan Escalante served in Iraq with the 3rd Infantry Division. But what Escalante's fellow soldiers and his superiors did not know is that he is an illegal alien who snuck into the Army using a forged green card. PRIVATE JUAN ESCALANTE, U.S. ARMY: They called me over and then they told me I had to go see the inspector general. And then I went and talked to him. And I asked him if I could stay. Am I going stay in? And they're like, it is a possibility. They don't really know. So I haven't really heard anything since.

SYLVESTER: Escalante's parents entered the country illegally from Mexico when he was 4. His status came to light when his mother and father applied for permanent residency.

The 19-year-old soldier believes he should be allowed to stay in a country he was willing to die for. Under an executive order signed by President Bush, legal immigrants who serve overseas can be put on a fast track for U.S. citizenship. Escalante's lawyer argues, the order should extend to illegal aliens as well.

GLEN PRIOR, IMMIGRATION ATTORNEY: He's been here all his life. He considers the United States to be his country. He's fought in the war in Iraq.

SYLVESTER: But critics say, letting Escalante gives illegal aliens a backdoor to U.S. citizenship and what should not be lost is the fact that Escalante broke the law.

MARK KRIKORIAN, CENTER FOR IMMIGRATION STUDIES: He's an illegal alien who fraudulently joined the military. And he, at the very least, should be discharged, rather than showered with rewards.

SYLVESTER: The Pentagon does not know how many more illegal aliens are serving in the ranks, but Juan Escalante is probably not alone.

(END VIDEOTAPE)

SYLVESTER: Army recruiters are supposed to verify the authenticity of a green card by checking the alien registration number with immigration services. A Pentagon spokesman acknowledges that proper procedures were not followed in Escalante's case -- John.

KING: Lisa, where does this case stand? Any sense of a timetable for a decision?

SYLVESTER: Well, his lawyer has applied for citizenship. And, meanwhile, as far as whether or not he gets to stay in the Army or not, the Army Human Resources will be meeting this week actually to discuss his case. And we're expecting a decision within the next few weeks -- John.

KING: And we'll keep an eye on it. Lisa Sylvester, live in New York, thank you very much.

And we would like to hear from you on this issue. Do you think Private Juan Escalante deserves to become a U.S. citizen, yes or no? Cast your vote at CNN.com/Lou and we'll bring you the results later in the show. We have reported extensively on this program about the sometimes inadequate medical care given to U.S. veterans. It is an issue in focus these days because of the rising number of American troops wounded in Iraq and also because of government plans to close some veterans hospitals. The plan is sparking outrage among veterans groups.

Bill Tucker has the report.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): This is the Manhattan V.A. Hospital. It appears on no list of possible hospital closures, yet it under review for curtailment of services and possible closure. Its closing would mean thousands of veterans would no longer have access by mass transit to a hospital or any access at all.

The Manhattan V.A. is an example of what many veterans find wrong with the current review process under way to close hospitals and trim budgets, a process that has already targeted seven hospitals for closing.

PETER GAYTAN, AMERICAN LEGION: The American Legion wanted those decisions to be made with stakeholder involvement, in other words, contacting the local veterans, those veterans who are waiting in line to receive care at those specific facilities and what their concerns are about closing those facilities. Will those veterans have to travel even further to see those much-needed services?

TUCKER: Supporters say, at the very least, targeting hospitals for closings now is very poor timing.

REP. CAROLYN MALONEY (D), NEW YORK: This review of all the hospitals at a time when we are increasing the need for veterans hospitals, we should be looking at ways to improve quality care and access, not ways to cut back quality care and access.

TUCKER: There is a common thread to all of the hospitals currently targeted for closure. They all provide extensive mental health services, services the Department of Veteran Affairs says can now be effectively provided on an outpatient basis without hurting the quality of care.

ROBERT ROSWELL, UNDERSECRETARY FOR HEALTH, DEPARTMENT OF VETERANS AFFAIRS: We're actually maintaining our long-term mental health capacity, but relocating those beds in tertiary centers, where a full range of services can be addressed in one location. And, in so doing, we're saving literally millions of dollars a year in excess operational costs.

(END VIDEOTAPE)

TUCKER: And saving money is part of what is behind the review of the Manhattan V.A. The V.A. currently has 1.2 million square feet of space there and only uses about half of that. And, John, for those of you, like me, who wondered what a tertiary facility, it is sometimes also known as a full-service hospital -- John.

KING: All right, Bill Tucker in New York, thank you very much, Bill, for that report, and for explaining tertiary. Thank you.

TUCKER: You're welcome.

KING: And coming up: Democratic Senator Byron Dorgan on whether U.S. tax dollars being wasted in the effort to rebuild Iraq and what he thinks it will take to improve security there. Senator Dorgan will join us next.

(COMMERCIAL BREAK)

KING: Your government at work tonight, hot air over a blimp that is costing taxpayers hundreds of thousands of dollars. Medicare is renting the blimp to fly over sporting events to advertise its benefits help line, 1-800-Medicare. That's the number to call with any questions about the program.

The $600,000 price tag for the blimp is just part of a $30 million advertising campaign. Citizens Against Government Waste today said that money would be better spent fixing billions of dollars in waste and abuse that it says plague Medicare.

The Bush administration is sending $18.5 billion in U.S. reconstruction aid to Iraq. But its process for awarding those contracts has come under fire. The Democratic Policy Committee today held a hearing on what it says are contract abuses.

Earlier, I spoke to the committee chairman, Democratic Senator Byron Dorgan of North Dakota. And I asked him if he could cite any specific abuses in the reconstruction effort so far.

(BEGIN VIDEOTAPE)

DORGAN: Well, there are a lot of anecdotal descriptions of what's happening in Iraq that give all of us pause.

As you know, over $18 billion is now going to be sent with this supplemental to do business in reconstructing Iraq. A lot of contractors will be involved. And you know the stories about 40 and 50 percent kickbacks to the wealthiest families of Iraq for working capital for Iraq contractors, the stories about contracts to put in air conditioning units by the thousands, and, by the time it goes through one, two and finally to a subcontractor, an air conditioning unit becomes an $11 ceiling fan.

All these things are very important for us to understand what is happening in Iraq with the U.S. taxpayer's money. I think that's important to get to the bottom of.

KING: Your hearing today is by the Democratic Policy Committee.

DORGAN: That's right.

KING: Proof to me that you're having a hard time getting the Republicans to take this issue as seriously as you think it needs to be taken?

DORGAN: Well, obviously, we would prefer to have the regular committee hearing structure work on this.

But it also is something that -- we tried very much to separate the military portion of the Iraq supplemental bill from the reconstruction portion. But we weren't able to do that. They said, no, this all goes as one. So, given the sole source contracts, no-bid contracts to Halliburton and Bechtel at the start of this -- and you probably saw the "Newsweek" story, waste, fraud and abuse in contracting.

We want to make sure that we create the conditions by which there is not waste of taxpayers' money when you spend billions and billions and billions of dollars to Iraq for reconstruction.

KING: You, sir, also tried to get much of that money to be loans, not grants.

DORGAN: Yes.

KING: It looks like, in the end, the president will get his way and it will be largely grants. Are you confident now, or will you try to take any additional steps to try to get those policing mechanisms in the reconstruction package, so you can watch these contracts as they go, or is this out of control, in your view?

DORGAN: Well, the money is now going. And the president says, no, this has to be American taxpayers picking up the tab. I didn't agree with that. But nonetheless, that's what's happening.

And as a result of that, the question is, how is that money going to be spent? Are we going to have adequate protection to make sure this isn't wasted, to make sure the abuses and the fraud that often exists when you're throwing money at a problem don't exist here?

We're going to have to put in place structures to make sure that we know the taxpayers' money is being spent effectively in Iraq.

KING: You mentioned Halliburton. That is the company mentioned, perhaps, most often when these no bid contracts come up because, of course, of Vice President Cheney's former role as the CEO of that company. A lot of allegations and innuendo.

Have you seen any evidence that the vice president or anyone close to the vice president has had any role at all in Halliburton getting money in post-war Iraq?

DORGAN: No. I've not seen any direct connections. But when you mention Halliburton, let me give you an example of problems I have with what's going on there. They're bringing in gasoline into Iraq at $1.59 a gallon when the folks in Iraq who -- with Iraq energy company can buy it for 98 cents a gallon.

The question is, why a 50 percent markup over what you could buy it for in the marketplace? The Halliburton folks say, "Well, that's for the cost of transporting it. But all the experts say that's nonsense. It wouldn't cost you 60, 70 cents a gallon to transport that gasoline."

So I think there are a lot of questions the American taxpayers ought to ask, tough questions and the Congress ought to ask on behalf of the taxpayers about who's spending what money and is it really effective? Or is it wasteful spending?

KING: What about how they're spending the money? In your view, in terms of the priorities, whether it be reconstructing the oil industry, building bridges, schools and hospitals, is the administration's approach, at least, do you think, right or does that need to be reconsidered as well?

DORGAN: Well, you know, it looked like Ambassador Bremer presented us with a plan that just represented a big wish list. Create a ZIP code system in Iraq, renumber the Iraqi telephone system, restore marshlands, $10,000 per student for business refresher courses, just for one month. I mean, look, it seemed to me like they threw everything but the kitchen sink into that request.

Some of these things are necessary to be reconstructed in Iraq. There's no question about that. I happen to think Iraqi oil should have paid for that, but I was on the short end of the vote here in the Senate.

But because billions will not go Iraq for the purpose of reconstruction, let's make sure this taxpayers' money is spent effectively, not wasted.

KING: Let me ask you lastly, sir, and this state a step back from the debate over the reconstruction money and look more broadly at the policy.

Over the weekend, tragic news of the missile hitting the Chinook helicopter, more U.S. fatalities in Iraq. What is your sense of where the administration is now? The president says a dangerous place and you must persevere and keep on. Is this White House, this Pentagon doing something fundamentally wrong, in your view?

DORGAN: Well, first of all, we can't withdraw from Iraq. There would be a bloodbath if we did that. It is heartbreaking to hear -- learn of these deaths of American soldiers.

What we should do, and I hope everyone agrees, is to move quickly as quickly, as quickly we can, to make this less of a U.S. occupation and more of an international occupation so that we can get the Iraqi security forces up and operating, and then ultimately be able to withdraw from Iraq.

KING: Senator Byron Dorgan, thank you for your time today.

DORGAN: Thank you very much.

KING: Another prominent Democratic senator has decided not run for re-election. Florida Senator bob graham announced his decision today, just a month after he dropped out of the race for the Democratic presidential nomination.

Graham joins Democratic Senator Zell Miller of Georgia, John Edwards of North Carolina, and Fritz Hollings of South Carolina, who have all said they won't run for another term. The four open seats could play a key role in deciding the balance of power in the next Senate.

Graham says he's confident the Democrat will prevail in the race for his seat.

(BEGIN VIDEO CLIP)

SEN. BOB GRAHAM (D), FLORIDA: We have a very strong group of Democrats running or who have indicated their intention to run for the U.S. Senate. I'm quite confident that the Democratic nominee will be successful next November and will provide outstanding leadership for both Florida and America.

(END VIDEO CLIP)

KING: Mark your calendar. The presidential election is now just a year away. But the nine Democrats running for the White House are already running short of time in their race to become the party's nominee.

If the past year is any indication, it's anyone's guess which Democrat will end up on the ballot opposing President Bush.

Candy Crowley has the report.

(BEGIN VIDEOTAPE)

CANDY CROWLEY, CNN CORRESPONDENT (voice-over): One year away from the presidential election, this much is clear.

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: How are you doing with the economy right now?

UNIDENTIFIED MALE: It's picking up. I've done well. It's a little slow in the summer but now it's crazy.

KERRY: Glad to hear it.

CROWLEY: A year can change anything. A year can change everything.

KERRY: Nobody expected such a situation with the war. These things happen.

CROWLEY: A war turned sour and the economy goes bullish, events have turned the conventional wisdom of politics on its head and back again.

Richard Gephardt has already had a rebirth, prompting a spate of tortoise and hare stories, with Gephardt emerging from the Iowa caucuses as a slow but deliberate Dean slayer.

Last winter's presumed frontrunner is not anymore. Possible scenario, Gephardt beats Dean in Iowa, John Kerry then beats a weakened Dean in New Hampshire. Voila! Comeback kid, the sequel.

KERRY: The people of New Hampshire want to know who can be president. And they want to see anybody who wants to fight for it. I intend to fight for it.

CROWLEY: The most familiar face in the Democratic crowd is languishing. Yes on war on Iraq, yes on the $87 billion, Joe Lieberman struggles in a primary shaped by anti-war Democrats.

SEN. JOE LIEBERMAN (D-CT), PRESIDENTIAL CANDIDATE: I didn't duck it. I didn't play politics. I voted to support our troops and finish the job.

CROWLEY: Lieberman looks for a respectable third in New Hampshire to take him to the more moderate climes of South Carolina, Arizona and Oklahoma, where he becomes the not-Dean candidate. It's a highly competitive position.

John Edwards, yet to make the kind of splash his fresh face promised, looks to survive Iowa and New Hampshire with a pair of thirds and make his play in South Carolina as the not-Dean.

Likewise, Wesley Clark. Passing on Iowa, Clark sees a third in New Hampshire as his ticket to South Carolina, where the state's large veterans population crowns him the not-Dean.

HOWARD DEAN (D), PRESIDENTIAL CANDIDATE: It's the stalker.

UNIDENTIFIED FEMALE: You don't have to say that.

DEAN: You guys are great, thank you.

UNIDENTIFIED FEMALE: Good morning.

DEAN: You guys are wonderful. Thanks for all your hard work.

CROWLEY: This is Dean, last November's asterisk, now a frontrunner with groupies. He has the most money, the best polls, the only pizzazz and a strategy of inevitability.

DEAN: We're going reach out and give three or four million people who didn't vote in the last election or voted for the third party a reason to vote. And when they vote, we're going to have more votes than the president of the United States. And this time the person with the most votes is going to the White House.

CROWLEY: All viable strategies possible scenarios. But the war could go right, the economy could go wrong or some combination thereof. Anything can happen in a year. And it usually does.

Candy Crowley, CNN, Washington.

(END VIDEOTAPE)

KING: The president's campaign pollster is serving notice he expects another close election. In a memo obtained by CNN White House correspondent Dana Bash, pollster Matthew Dowd told the president's campaign managers the race is, quote, "likely to be very tight and go down to the wire," end quote.

Dowd cites what he calls a divided and polarized electorate. Dowd also predicts the president could fall behind in the polls once the Democratic challenger emerges from the pack, but Dowd predicts this traditional bounce will be temporary.

Coming up, "Wasted Minds: Our Failing Schools." Tonight, a growing number of American children are home schooled. But are they better off? Casey Wian will have that report, up next.

(COMMERCIAL BREAK)

KING: Tonight, we begin a series of special reports, "Wasted Minds: Our Failing Schools."

A growing number of families are dissatisfied with both public and private schools and are bringing their children's education home. Tonight we look at the debate over whether this practice of home schooling is helping or hurting our nation's children.

Casey Wian reports from Huntingdon Beach, California.

(BEGIN VIDEOTAPE)

CLAIRE WILHOITE, STUDENT: The fox was left on the sand.

CASEY WIAN, CNN CORRESPONDENT (voice-over): Like most 6-year- olds, Claire Wilhoite is polishing her reading skills but not in class, she's being home schooled.

KAREN WILHOITE, MOTHER: To get back to the fundamentals. You know, now they're so politically correct. They think teach all this stuff that to me is to be taught at home. We're giving them a rich man's education. They have private tutor, you know, versus being in a classroom of 20, 25 30, depending on what grade they're in.

WIAN: The Wilhoites also want religion to be part of their children's education and more control over their choices of friends.

At least a million American children are now being home schooled or about two percent of those aged 6 to 17. While estimates vary, all agree the numbers are growing rapidly, up to 15 percent a year.

The Wilhoites plan to home school all of their children, even though the backyard of their house borders the playground of a public elementary school that is rated among California's highest for academic achievement.

Twelve-year-old Courtney Walker fell behind in both public and private schools.

VICKY WALKER, MOTHER: I paid for a lot of tests. They said that she had ADD. I -- they wanted to give her medication, and at that point, I said, no, absolutely not. I knew there was another -- a better way.

WIAN: They began home schooling this year. Courtney is thriving.

COURTNEY WALKER, STUDENT: It just helped me get further up when I wasn't having all the distractions as I was in school.

WIAN: Home schooling groups offer educational materials, tutors and legal help.

Still, colleges are struggling with admission standards. At USC, home schooled applicants tripled over the past five years.

MICHAEL THOMPSON, DEAN OF ADMISSIONS, USC: We haven't noticed any difference in the way home schooled students fare, as opposed to students admitted from a more traditional sort of educational background. The numbers are relatively small for us, though.

WIAN: That could change soon, because most of the growth in home schooling is among elementary school students.

Casey Wian, CNN, Huntingdon Beach, California.

(END VIDEOTAPE)

KING: We'll continue this series of special reports, "Wasted Minds: Our Failing Schools." Tomorrow, the student population is growing while teachers are disappearing. We look at the resource crisis facing the American education system. That's tomorrow. Please join us.

Tonight's thought is on education. "Education is the movement from darkness to light." That is from psychologist and author Allan Bloom.

A reminder now to vote in tonight's poll. It's about a veteran of the Iraq war who also is an illegal alien. Our question is, do you think Private Juan Escalante deserves to become a U.S. citizen? Yes or no? Cast your vote at CNN.com/Lou. We'll bring you the results a little later in the show.

And coming up, rebuilding Iraq. Our next guest says the Iraqi people should have more control over their country's fate. Former ambassador Timothy Carney worked on the reconstruction effort in Iraq, and he will join us, just ahead.

(COMMERCIAL BREAK)

ANNOUNCER: LOU DOBBS TONIGHT continues. Here again, John King.

KING: The issue of rebuilding Iraq has been at the center of controversy, not only here in Washington, but around the world. My next guest was there at the beginning of the reconstruction effort. And he says the main goal right now should be shifting power to the people of Iraq. He says the United States should make it absolutely clear that this is the priority in Iraq, to shake any suspicion of a hidden agenda.

Timothy Carney is the former U.S. ambassador to Sudan and Haiti. He joins me here now live in Washington.

How, sir, send this signal and shift power at a time when the White House says there is no new constitution, that the Iraqi governing council is not prepared to take power? How do you do this?

TIMOTHY CARNEY, FORMER U.S. AMBASSADOR: You've got to do it with the Iraqis. You've got to get hold of all of the Iraqis who are willing to give you an opinion. That means you've got to have a staff that can get out and talk to Iraqis.

You've get to get as many Arabists as the State Department is able to send out there. And saturate the airwaves with a transparent message from Paul Bremer and the entire coalition provisional authority of all nationalities that we're there, basically, to move Iraq into the 21st Century and their ideas on how that can happen are the most important element of the equation.

KING: You talked about building that trust with the Iraqi people. You were quoted extensively in a Sunday "New York Times" magazine article. The author of that article at the very end comes to this conclusion. He writes, quote, "While occupying and reconstructing Iraq was bound to be difficult, the fact that it may be turning into a quagmire is not a result of fate, but rather a result of poor planning and wishful thinking."

A fair assessment, sir? Did this administration plan poorly and have overly optimistic thinking?

CARNEY: Yes, of course. There's no question about that. But that's not the issue now. The issue now is to not point any fingers. What's important now is to get it right.

And to the administration's credit, at the end of June and early July, Secretary Rumsfeld sent out a team from the Center for Strategic and International Studies here in Washington, D.C., to find out what needed to be done. That team made seven strong recommendations, and those issues of governance and Iraqi participation remain to be successfully addressed.

KING: You talk about sending that team out in June, I think you said.

CARNEY: Late June, early July.

KING: That's after the president, more than a month, almost after two months after the president declared major combat operations over. So obviously some deficiencies there, they acknowledge.

You say in this article this -- the U.S. Military, quote, "simply did not understand or give enough priority to the transition from their military mission to our political military mission."

How could they have gone into this operation, given the experiences in Kosovo and elsewhere, and not have been prepared to turn it over to the reconstruction?

CARNEY: That's a question for history. I frankly don't know. I was amazed and dismayed as indeed my pros at the time suggests. But let me come back to today, the issue is getting it right. That's what we need to do now.

KING: In terms of getting it right, in recent days the White House talked with the national security team about accelerating the pace of getting Iraqis on the front line of security.

One of the first things Ambassador Bremer did when he went to Iraq was make clear that he was disbanding the Iraqi army, some 400,000 people. Now there's some talk of bringing them back, at least some of them back. Was it a mistake then or is it a mistake now to talk about that?

CARNEY: It was a mistake then. There isn't any doubt about it. It was too ambitious and badly conceived. Similarly the -- the all embracing, all encompassing dismantling of the Ba'ath organization and proscribing its -- too many of its members from activities in government was also overdrawn.

Getting it right now is still possible, even though we've lost a lot of time.

KING: You say still possible. You see these pictures, the helicopter down, the attacks on the hotel in Baghdad where Secretary Wolfowitz was staying. What is your sense in terms of Iraqi public opinion, mass public opinion? Does there come a point when the people believe that this resistance to the U.S. might or will succeed, and what is the damming effect, if you will, if that corner is turned?

CARNEY: I see two elements at work here. One is the evolution of day-to-day life. More children in school, more businesses open, more economic life, more electricity.

On the other hand, there is no doubt about an increase in the quality, sophistication and quantity of violence, not only against the coalition, but against Iraqis themselves.

My question is how broad is this accelerated violence? It may be more restricted to the Sunni triangle near Baghdad than in the north and in the south, despite the occasional bomb there.

KING: And sir, if you can travel the 16 blocks and have a few minutes with President Bush and say, "Mr. President, do this one thing tomorrow," what would the one thing be? CARNEY: I think the one thing would be ensure that the coalition can use the media, radio, TV, print, to communicate its vision to Iraqis.

KING: Former U.S. Ambassador Tim Carney, thank you very much for your time tonight and your thoughts.

CARNEY: Thank you.

KING: Thank you, sir.

Tonight's quote is from Fort Carson, Colorado, where four of the soldiers killed in Sunday's helicopter attack were based.

And we quote, "This incident underscores the sacrifices our men and women take every day in defense of our country." That was from Lt. Col. Thomas Budzyna, public affairs officer at Fort Carson.

Coming up, Christine Romans will have the market. And we'll share some of your thoughts on our special series of reports on "Wasted Minds: Our Failing Schools."

Stay with us.

(COMMERCIAL BREAK)

KING: Now the results of tonight's poll question about the veteran of the Iraq war who also is an illegal alien. Do you think Private Juan Escalante deserves to become a U.S. citizen? Seventy- five percent of you said yes, 25 percent no.

On Wall Street today, a solid rally to start the first week of November. The Dow jumped 57 points to close at its highest level in 17 months. The NASDAQ surged 35 to a 21-month high. The S&P 500 added 8.

There was more fall-out today, though, from the investigation into mutual fund misconduct. Christine Romans has the report.

CHRISTINE ROMANS, CNN CORRESPONDENT: State regulators and the SEC told lawmakers the mutual fund industry violated the public trust. Fund managers traded for their own profit, special relationships allowed investors trading privileges and funds failed to enforce rules against moving quickly into and out of funds or trading after hours.

Now, regulators call the abuses widespread. Thirty percent of brokerage firms assisted market timers. Ten percent of mutual fund groups allowed late trading. And the SEC found that about 30 percent of fund firms disclosed their holdings to select clients more often than normal.

New York Attorney General Eliot Spitzer blasted mutual funds' own oversight.

(BEGIN VIDEO CLIP) ELIOT SPITZER, NEW YORK ATTORNEY GENERAL: The boards of directors of the mutual funds have been inert. They have been passive. They have failed. They have utterly failed the investor. They have misunderstood their role. They have not been responsive to the appropriate parties. This must change.

(END VIDEO CLIP)

ROMANS: As the regulators testified, the body count rose.

After 33 years, Lawrence Lasser is out at Putnam Investments. He's the most senior executive to lose his job yet in the scandal.

Richard Strong resigned from Strong Mutual Funds but will remain at Strong Capital. He's accused of market timing to the tune of $600,000 in profits.

And the SEC's Boston chief stepped down as critics wondered why the SEC hadn't detected all this wrongdoing much earlier.

Meanwhile, Morningstar told investors to stop any new deposits into Putnam. Red flags there. The ousted CEO was paid at least $142 million over the past five years. That's a hefty payout for a CEO who presided over the worst public relations disaster in memory and a scandal that's led to $4 billion in redemptions in the past week.

Now, Lasser could be owed millions more. Putnam's parent, Marshall McLennan, is reviewing his contract.

Meanwhile, regulators are set to file fraud charges against six former Prudential brokers for market timing. That could come as early as tomorrow.

John, the SEC and the NASDA are zeroing in on overcharges for mutual funds. They say in just 2001 and 2002, investors were overcharged $86 million for their mutual fund purchases -- John.

KING: Christine, all this focus on violating the trust -- mutual funds, mutual fund managers -- and yet the market is going up. Explain that one.

ROMANS: That's the ultimate irony. Six straight days in a row of a rally for the Dow Jones Industrial Average. And this should be the best fundamental backdrop in years for some of these mutual funds to be operating. But they are really mired here in a public relations disaster -- John.

KING: Christine Romans in New York, thank you.

And now for a look at some of your thoughts.

From Marinette, Wisconsin, "Thank you for drawing attention to our problems in the school system. This is a nationwide problem and if we do not wake up soon, we will be left behind. I shudder to think how many bright, wonderful kids within gray areas are being left behind because of our lack of interest in the school systems." That from Mary Riddell.

And from Anchorage, Alaska, "Thank you for finally exposing a major problem that has existed for years in the manufacturing industry: outsourcing. I have witnessed thousands of jobs lost over the years, and far too many good people put on the unemployment line only to increase the profit margin and corporate payouts." That's from Robert Sharp.

And from Nanuet, New York -- I hope I said it right -- "Great job on your illegal aliens horror stories. Being a veteran with a 'non- compensable' service connected disability and shut out from benefits by the VA's 2003 enrollment decision, my question is, how do I apply for illegal alien status?" That's from Joe Cas.

And from Florida, "I recently saw a report on your program about a soldier who lost a limb and saved the life of another soldier. He seems like an incredible individual with a very positive outlook, regardless of the loss. And yet, all we hear about is Jessica Lynch." That was a note from Joanne.

And that soldier was Army Specialist Robert Acosta. Every week we feature one American hero who has recently returned from combat in Iraq and Afghanistan and faced additional challenges here at home.

We love hearing from you. Please e-mail us at LouDobbs@CNN.com.

And that's our show tonight. Thanks for being with us. Lou will be back tomorrow. He'll be joined by Senator John Warner, the chairman of the Senate Armed Services Committee.

And in "Wasted Minds: Our Failing Schools," a look at America's overcrowded classrooms and overwhelmed teachers. Does Washington have a solution?

For all of us in Washington and in New York, good night.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com





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Aired November 3, 2003 - 18:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: This is LOU DOBBS TONIGHT for Monday, November 3. Sitting in for Lou Dobbs, John King.
JOHN KING, CNN ANCHOR: Good evening from the nation's capital.

Tonight: more death and destruction in Iraq after one of the deadliest attacks on U.S. soldiers since the war on Saddam Hussein began. Ambassador Timothy Carney, a former member of the reconstruction team, will tell us what he thinks is wrong with Bush administration policy and how the United States can succeed.

President Bush wins Senate approval for his spending plans in Iraq. But the coalition faces charges of cronyism, waste and corruption. Senator Byron Dorgan will give us his assessment.

An illegal alien fought with distinction as an Army private in Iraq. Has he won the right to become a U.S. citizen or should he be deported or? Lisa Sylvester will have that report.

And in our special report, "Wasted Minds: Our Failing Schools," at least one million American children are being schooled at home. And the numbers are growing sharply. Casey Wian will report.

But first tonight: more terrorist attacks in Iraq and a defiant promise from President Bush that America will never run from its mission there. The president made no direct reference to the attack on a Chinook helicopter that killed 16 Americans. But he said terrorists will not intimidate the United States.

In today's attacks, a land mine killed a soldier in Tikrit and a bomb killed a number of civilians in Karbala. The sharp escalation in attacks has raised new questions about the size of the U.S. force in Iraq and the coalition's tactics.

Senior Pentagon correspondent Jamie McIntyre reports -- Jamie.

JAMIE MCINTYRE, CNN MILITARY AFFAIRS CORRESPONDENT: Well, John, the Pentagon insists it does not need to increase the size of the U.S. force in Iraq, but will continue to try to accelerate the turnover of security to Iraqi forces. And U.S. commanders say they'll stick to their strategy of trying to hunt down the insurgents, this as the wounded, 16 of the 20 wounded from that Sunday helicopter shootdown, arrived in Ramstein, Germany, for medical treatment.

The soldiers were there -- 11 of them rushed into intensive care. Others were less seriously injured, this on a day when, as you said, President Bush was vowing, the United States will not cut and run in Iraq. In that attack yesterday, 16 soldiers died. According to eyewitnesses, the second of two shoulder-launched missiles fired from a stand of trees hit the CH-47 Chinook helicopter as it flew just a few hundred feet above the ground, according to Pentagon sources.

It is not clear that the missile actually detonated, but it did strike the rear engine and apparently started a chain reaction that plunged the helicopter into a fiery crash. Still, knocking these helicopters out of the sky, even with those heat-seeking missiles, is not easy. It requires you to be in the right place at the right time and have a little bit of training.

That said, these helicopters routinely fly very low in order to minimize the time that they're a target over a particular area. In this case, though, it appeared it gave the crew almost no time to react, to dispense flares, or take other countermeasures that might have been able to evade these heat-seeking missiles.

An investigation of the incident is under way to see exactly what happened and whether the crew should have done anything differently. But, at this point, U.S. commanders say they will continue to use helicopters to move around Iraq. It's still seen to be the fastest and safest way to get around. However, they will look at the flight patterns to make sure they're not becoming too predictable -- John.

KING: Well, Jamie, the Pentagon for some time has made rounding up and destroying these shoulder-launched missiles a priority, offering a $500 reward. That strategy does not appear to be working. Any other steps in the works, either increasing the reward or some other way to round up these missiles?

MCINTYRE: Well, there's no plans to increase the award that I'm aware of.

In fact, in Afghanistan, when the United States sent Stinger missiles there, they offered $150,000 for those U.S.-built Stinger missiles. They still didn't get all of them back. So that would be a probably very difficult way to try to get those missiles off. They're going to just try to continue to pursue the people who are opposing the coalition.

KING: Jamie McIntyre at the Pentagon, thank you.

And President Bush's comments on Iraq today were the latest in a series of remarks expressing his determination to stay the course in the war against Saddam Hussein. Today, Mr. Bush said the United States is carrying out a vital mission in Iraq and America, he said, will do whatever is necessary to make this country secure. The president also paid tribute to the Americans who have lost their lives in Iraq and the broader war on terror.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Some of the best have fallen in service to our fellow Americans. We mourn every loss. We honor every name. We grieve with every family. And we will always be grateful that liberty has found such brave defenders.

(APPLAUSE)

(END VIDEO CLIP)

KING: Troops on the Chinook helicopter came from at least four bases in the United States. Those bases are Fort Sill in Oklahoma, Fort Campbell in Kentucky, Fort Hood in Texas, and Fort Carson in Colorado.

Kris Osborn is at Fort Sill in Oklahoma.

Kris, the mood at the base tonight?

KRIS OSBORN, CNN CORRESPONDENT: Well, John, very somber, indeed.

There's a look in the eye of many on post here at Fort Sill which is one of both sadness and loss, of course, in part, because six of the 16 fatalities on board that Chinook that crashed in Iraq were based here. This is home to the 3rd Corps Artillery. And earlier today, the Pentagon, through DOD officials, released the names of four of the six who died.

They include, as mentioned earlier, Paul A. Velazquez. He's 29 from California. Sergeant Ross A. Pennanen from Shawnee, Oklahoma. He's 36 years old -- was. Staff Sergeant Joe N. Wilson from Crystal Springs, Mississippi. And Keelan Moss from Houston. He was 23.

Clearly, a tough blow dealt to the community here on post at Fort Sill. Earlier, the commanding general, along with others, emerged to the podium to talk about the loss. They included Brigadier General Formica.

Here is what he said.

(BEGIN VIDEO CLIP)

BRIG. GEN. RICHARD P. FORMICA, 3RD CORPS ARTILLERY COMMANDING GENERAL: We were tragically reminded yesterday that our soldiers are serving their country and its cause in harm's way in Iraq, that our ranks are filled with great soldiers and selfless, giving families. We are mindful of their sacrifice and we are proud of their service.

(END VIDEO CLIP)

OSBORN: Now, the two names, John, that have yet to be released have not been formally acknowledged or released by DOD officials, in part because the second and primary and secondary next of kin have yet to be notified.

That being said, there was also a lot of discussion about the families here, that many of the wives of those who died have come forward to talk about ways that they can help, along with chaplains and psychologists. And on the question of morale and how has this impacted soldiers on the ground and here on post, they say that they're very committed to their mission and they feel that this will not deter their resolve to move forward.

That being said, soldiers will both privately, and officials will acknowledge, that these mounting attacks, an escalation, they refer to it as, continues to take a psychological toll -- John.

KING: Kris Osborn, on a difficult day at Fort Sill, Oklahoma -- thank you, Kris.

The military has not yet released a complete list of the soldiers killed in yesterday's attack on the Chinook. As Kris Osborn reported, officials are still informing some of the families of the names of those who died. The soldiers came from communities across the whole of this country. One of the victims was Sergeant Ernest Bucklew. He was returning home for his mother's funeral in Pennsylvania.

Also among the dead was the helicopter's pilot, Lieutenant Brian Slavenas. He was a former Army paratrooper who was serving in the Illinois National Guard.

On Capitol Hill today, a spirited debate over the president's Iraq policy and his request for another $87 billion for the war and reconstruction in Iraq and Afghanistan. There was never any doubt the spending bill would pass. It was approved in a voice vote tonight. But the session gave senators an opportunity to express their frustrations.

Kitty Pilgrim is here with the report -- Kitty.

KITTY PILGRIM, CNN CORRESPONDENT: John, no one held back.

It was an absolute litany of sore points. But the one concept that most agreed on was that troops must be well supported, especially now.

(BEGIN VIDEOTAPE)

PILGRIM (voice-over): It was a complaint session that went all day.

SEN. FRITZ HOLLINGS (D), SOUTH CAROLINA: It is time that we speak out here, because, unless we are going to put in 100,000 to 150,000 more troops, U.S. troops, and get law and order into Iraq, into Baghdad, you're going to have operation meat grinder continue.

PILGRIM: Dick Durbin pointed out recent high casualties, saying the pilot of the Chinook helicopter shot down this weekend was from his state.

SEN. DICK DURBIN (D), ILLINOIS: Today, in one of the darkest hours, with some of the saddest news, it is difficult to look at this and understand how even money is going solve our problems.

PILGRIM: One billion dollars a week to sustain troops in Iraq was a number cited repeatedly in the debate. There was a lot of grousing about burdening the U.S. taxpayer, some outrage that Iraq would not partially finance reconstruction through oil sales. SEN. BYRON DORGAN (D), NORTH DAKOTA: They've got liquid gold under this sand, second largest reserves in the world.

PILGRIM: But, in the end, the Senate will support the $87 billion supplemental spending bill for military operations and reconstruction of Afghanistan and Iraq, $44 billion for operations and equipment, $18 billion for reconstruction and security, $17 billion for troop salaries and benefits -- for reconstruction of Iraq, a bit less than the president had asked for, although a bit more for Afghanistan. Some pointed out, the status of Iraq's debt is still unclear and made it clear what they wanted.

SEN. SUSAN COLLINS (R), MAINE: Saudi Arabia, France, Germany and Russia should not be repaid for debts incurred by Saddam Hussein, while the United States invests billions of its own dollars in reclaiming the country for the Iraqi people.

(END VIDEOTAPE)

PILGRIM: It was a session dominated by Democrats. There is still a lot of complaining about making this a grant and not partially a loan. But, in the end, that was not enough to change the outcome -- John.

KING: But, Kitty, this debate has been dominating Washington for weeks now. It is a major divide between the Democrats and this president. Why would they have only a voice vote? Why not go on with the yeas and nays?

PILGRIM: Well, John, it was pretty much a done deal. It was going to go through. Everyone took their opportunity to make their objections. And yet there is no real record whether they voted for or against. And that's to some people's benefit in the campaign season, isn't it?

KING: Yes, perhaps it will be.

Kitty Pilgrim, thank you very much.

A victory for the president in Congress, but overseas tonight, fresh evidence of lingering tensions with Germany over U.S. policy in Iraq. The German defense minister, Peter Struck, today questioned the legality of the war against Saddam Hussein and the quality of prewar U.S. intelligence. The German official's comments threaten to undermine efforts by President Bush and German Chancellor Gerhard Schroeder to mend their rift over Iraq.

The two leaders met, as you here, in New York back in September and said their differences were behind them.

Coming up: The Supreme Court will hear a key case about HMOs and patients rights. Peter Viles will report on what the impact on health care could be.

Then, Senator Byron Dorgan on postwar Iraq, the $87 billion price tag for initial reconstruction, and his concerns about how that money is being spent.

And "Wasted Minds: Our Failing Schools," all that week, a special report on weaknesses in the American education system -- tonight, Casey Wian on the growing practice of homeschooling.

(COMMERCIAL BREAK)

KING: The Supreme Court today agreed to hear two cases that could settle a controversial question: Can you sue your HMO for negligence? Federal law protects HMOs and other health care plans from most lawsuits. But now the high court has agreed to hear the issue.

Peter Viles has the report.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): The Supreme Court wading into a debate that Congress recently failed to settle: Should Americans have the right to sue their HMOs for negligence? The case at issue, a suit brought by a Texas man whose doctor wanted him to take the painkiller Vioxx, but his Aetna HMO required him to try two cheaper painkillers first.

One of those drugs gave him bleeding ulcers. And so he sued Aetna in state court. The key federal law at issue, the 1974 Health and Benefit Law signed by then President Ford known as ERISA. Under that law, employers and the multistate health plans they offer are protected from state negligence lawsuits. That's the way the health care industry wants it to stay. You can sue your doctor for negligence, but not your HMO.

SUSAN PISANO, AMERICAN ASSN. OF HEALTH PLANS: We're hoping there is clarification that an administrative decision is covered by ERISA and treatment decisions are different, and they're the ones that are covered by medical malpractice.

VILES: Consumer advocates and trial lawyers believe Congress had no idea that HMOs would grow into giants that dictate how to treat certain conditions, for example, no Vioxx until you've tried two other drugs first.

JOANNE DOROSHOW, CENTER FOR JUSTICE AND DEMOCRACY: It didn't see that managed care were going to be making these kinds of administrative decisions that resulted in malpractice occurring and that resulted in injuries and death. And, as a result of that, they didn't anticipate the need to sue.

ROBERT HUNTER, CONSUMER FEDERATION OF AMERICA: I think the law was interpreted by the Supreme Court in ways that nobody in Congress ever expected. This bill was supposed to be a consumer protection bill and it's ended up hurting consumers.

(END VIDEOTAPE)

VILES: Now, just to be clear on the issue of whether you can sue your HMO, under this federal law, you cannot sue for negligence in a state court, where you might win a huge verdict. You can sue in federal court, but there, the stakes are much lower. You can only win back the value of the service that is at issue, in this case, just the value of that Vioxx, rather than any punitive damages -- John.

KING: Peter Viles in New York, thank you, Peter.

Now, the Supreme Court today said it will not hear appeals from Alabama Chief Justice Roy Moore over the removal of a Ten Commandments monument from an Alabama courthouse. Controversy erupted after Judge Moore secretly placed the monument in the courthouse in the middle of the night. Moore was later suspended for ignoring a federal court order to remove that monument. But Judge Moore has no intention of backing down.

(BEGIN VIDEO CLIP)

JUDGE ROY MOORE, ALABAMA CHIEF JUSTICE: I want to tell you one thing. It is not over. We do not intend to stop educating the people of this country. And, indeed, when one third of our country rejects God, we're going to turn to the other two.

(END VIDEO CLIP)

KING: Federal regulators are cracking down on violators of the do-not-call list, that new database that is designed to protect consumers from unwanted telemarketing calls. The FCC wants to slap a $780,000 fine on AT&T. AT&T is accused of making 78 phone calls to 29 consumers who asked not to be called.

As of today, regulators have received more than 50,000 complaints about unwanted telemarketing calls since the national do-not-call registry went into effect. The AT&T fine would be the first major penalty.

Coming up: a soldier who broke the law in order to serve with the United States military in Iraq. Now he faces the consequences. Lisa Sylvester will report.

(COMMERCIAL BREAK)

KING: Tonight, the Army faces a critical decision in the controversial case of one soldier who fought in Iraq. The private earned the respect of his peers and the admiration of his commanders. But it turns out he was breaking the law. Now he faces not just discharge, but deportation.

Lisa Sylvester has the report.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): For four months, Private Juan Escalante served in Iraq with the 3rd Infantry Division. But what Escalante's fellow soldiers and his superiors did not know is that he is an illegal alien who snuck into the Army using a forged green card. PRIVATE JUAN ESCALANTE, U.S. ARMY: They called me over and then they told me I had to go see the inspector general. And then I went and talked to him. And I asked him if I could stay. Am I going stay in? And they're like, it is a possibility. They don't really know. So I haven't really heard anything since.

SYLVESTER: Escalante's parents entered the country illegally from Mexico when he was 4. His status came to light when his mother and father applied for permanent residency.

The 19-year-old soldier believes he should be allowed to stay in a country he was willing to die for. Under an executive order signed by President Bush, legal immigrants who serve overseas can be put on a fast track for U.S. citizenship. Escalante's lawyer argues, the order should extend to illegal aliens as well.

GLEN PRIOR, IMMIGRATION ATTORNEY: He's been here all his life. He considers the United States to be his country. He's fought in the war in Iraq.

SYLVESTER: But critics say, letting Escalante gives illegal aliens a backdoor to U.S. citizenship and what should not be lost is the fact that Escalante broke the law.

MARK KRIKORIAN, CENTER FOR IMMIGRATION STUDIES: He's an illegal alien who fraudulently joined the military. And he, at the very least, should be discharged, rather than showered with rewards.

SYLVESTER: The Pentagon does not know how many more illegal aliens are serving in the ranks, but Juan Escalante is probably not alone.

(END VIDEOTAPE)

SYLVESTER: Army recruiters are supposed to verify the authenticity of a green card by checking the alien registration number with immigration services. A Pentagon spokesman acknowledges that proper procedures were not followed in Escalante's case -- John.

KING: Lisa, where does this case stand? Any sense of a timetable for a decision?

SYLVESTER: Well, his lawyer has applied for citizenship. And, meanwhile, as far as whether or not he gets to stay in the Army or not, the Army Human Resources will be meeting this week actually to discuss his case. And we're expecting a decision within the next few weeks -- John.

KING: And we'll keep an eye on it. Lisa Sylvester, live in New York, thank you very much.

And we would like to hear from you on this issue. Do you think Private Juan Escalante deserves to become a U.S. citizen, yes or no? Cast your vote at CNN.com/Lou and we'll bring you the results later in the show. We have reported extensively on this program about the sometimes inadequate medical care given to U.S. veterans. It is an issue in focus these days because of the rising number of American troops wounded in Iraq and also because of government plans to close some veterans hospitals. The plan is sparking outrage among veterans groups.

Bill Tucker has the report.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): This is the Manhattan V.A. Hospital. It appears on no list of possible hospital closures, yet it under review for curtailment of services and possible closure. Its closing would mean thousands of veterans would no longer have access by mass transit to a hospital or any access at all.

The Manhattan V.A. is an example of what many veterans find wrong with the current review process under way to close hospitals and trim budgets, a process that has already targeted seven hospitals for closing.

PETER GAYTAN, AMERICAN LEGION: The American Legion wanted those decisions to be made with stakeholder involvement, in other words, contacting the local veterans, those veterans who are waiting in line to receive care at those specific facilities and what their concerns are about closing those facilities. Will those veterans have to travel even further to see those much-needed services?

TUCKER: Supporters say, at the very least, targeting hospitals for closings now is very poor timing.

REP. CAROLYN MALONEY (D), NEW YORK: This review of all the hospitals at a time when we are increasing the need for veterans hospitals, we should be looking at ways to improve quality care and access, not ways to cut back quality care and access.

TUCKER: There is a common thread to all of the hospitals currently targeted for closure. They all provide extensive mental health services, services the Department of Veteran Affairs says can now be effectively provided on an outpatient basis without hurting the quality of care.

ROBERT ROSWELL, UNDERSECRETARY FOR HEALTH, DEPARTMENT OF VETERANS AFFAIRS: We're actually maintaining our long-term mental health capacity, but relocating those beds in tertiary centers, where a full range of services can be addressed in one location. And, in so doing, we're saving literally millions of dollars a year in excess operational costs.

(END VIDEOTAPE)

TUCKER: And saving money is part of what is behind the review of the Manhattan V.A. The V.A. currently has 1.2 million square feet of space there and only uses about half of that. And, John, for those of you, like me, who wondered what a tertiary facility, it is sometimes also known as a full-service hospital -- John.

KING: All right, Bill Tucker in New York, thank you very much, Bill, for that report, and for explaining tertiary. Thank you.

TUCKER: You're welcome.

KING: And coming up: Democratic Senator Byron Dorgan on whether U.S. tax dollars being wasted in the effort to rebuild Iraq and what he thinks it will take to improve security there. Senator Dorgan will join us next.

(COMMERCIAL BREAK)

KING: Your government at work tonight, hot air over a blimp that is costing taxpayers hundreds of thousands of dollars. Medicare is renting the blimp to fly over sporting events to advertise its benefits help line, 1-800-Medicare. That's the number to call with any questions about the program.

The $600,000 price tag for the blimp is just part of a $30 million advertising campaign. Citizens Against Government Waste today said that money would be better spent fixing billions of dollars in waste and abuse that it says plague Medicare.

The Bush administration is sending $18.5 billion in U.S. reconstruction aid to Iraq. But its process for awarding those contracts has come under fire. The Democratic Policy Committee today held a hearing on what it says are contract abuses.

Earlier, I spoke to the committee chairman, Democratic Senator Byron Dorgan of North Dakota. And I asked him if he could cite any specific abuses in the reconstruction effort so far.

(BEGIN VIDEOTAPE)

DORGAN: Well, there are a lot of anecdotal descriptions of what's happening in Iraq that give all of us pause.

As you know, over $18 billion is now going to be sent with this supplemental to do business in reconstructing Iraq. A lot of contractors will be involved. And you know the stories about 40 and 50 percent kickbacks to the wealthiest families of Iraq for working capital for Iraq contractors, the stories about contracts to put in air conditioning units by the thousands, and, by the time it goes through one, two and finally to a subcontractor, an air conditioning unit becomes an $11 ceiling fan.

All these things are very important for us to understand what is happening in Iraq with the U.S. taxpayer's money. I think that's important to get to the bottom of.

KING: Your hearing today is by the Democratic Policy Committee.

DORGAN: That's right.

KING: Proof to me that you're having a hard time getting the Republicans to take this issue as seriously as you think it needs to be taken?

DORGAN: Well, obviously, we would prefer to have the regular committee hearing structure work on this.

But it also is something that -- we tried very much to separate the military portion of the Iraq supplemental bill from the reconstruction portion. But we weren't able to do that. They said, no, this all goes as one. So, given the sole source contracts, no-bid contracts to Halliburton and Bechtel at the start of this -- and you probably saw the "Newsweek" story, waste, fraud and abuse in contracting.

We want to make sure that we create the conditions by which there is not waste of taxpayers' money when you spend billions and billions and billions of dollars to Iraq for reconstruction.

KING: You, sir, also tried to get much of that money to be loans, not grants.

DORGAN: Yes.

KING: It looks like, in the end, the president will get his way and it will be largely grants. Are you confident now, or will you try to take any additional steps to try to get those policing mechanisms in the reconstruction package, so you can watch these contracts as they go, or is this out of control, in your view?

DORGAN: Well, the money is now going. And the president says, no, this has to be American taxpayers picking up the tab. I didn't agree with that. But nonetheless, that's what's happening.

And as a result of that, the question is, how is that money going to be spent? Are we going to have adequate protection to make sure this isn't wasted, to make sure the abuses and the fraud that often exists when you're throwing money at a problem don't exist here?

We're going to have to put in place structures to make sure that we know the taxpayers' money is being spent effectively in Iraq.

KING: You mentioned Halliburton. That is the company mentioned, perhaps, most often when these no bid contracts come up because, of course, of Vice President Cheney's former role as the CEO of that company. A lot of allegations and innuendo.

Have you seen any evidence that the vice president or anyone close to the vice president has had any role at all in Halliburton getting money in post-war Iraq?

DORGAN: No. I've not seen any direct connections. But when you mention Halliburton, let me give you an example of problems I have with what's going on there. They're bringing in gasoline into Iraq at $1.59 a gallon when the folks in Iraq who -- with Iraq energy company can buy it for 98 cents a gallon.

The question is, why a 50 percent markup over what you could buy it for in the marketplace? The Halliburton folks say, "Well, that's for the cost of transporting it. But all the experts say that's nonsense. It wouldn't cost you 60, 70 cents a gallon to transport that gasoline."

So I think there are a lot of questions the American taxpayers ought to ask, tough questions and the Congress ought to ask on behalf of the taxpayers about who's spending what money and is it really effective? Or is it wasteful spending?

KING: What about how they're spending the money? In your view, in terms of the priorities, whether it be reconstructing the oil industry, building bridges, schools and hospitals, is the administration's approach, at least, do you think, right or does that need to be reconsidered as well?

DORGAN: Well, you know, it looked like Ambassador Bremer presented us with a plan that just represented a big wish list. Create a ZIP code system in Iraq, renumber the Iraqi telephone system, restore marshlands, $10,000 per student for business refresher courses, just for one month. I mean, look, it seemed to me like they threw everything but the kitchen sink into that request.

Some of these things are necessary to be reconstructed in Iraq. There's no question about that. I happen to think Iraqi oil should have paid for that, but I was on the short end of the vote here in the Senate.

But because billions will not go Iraq for the purpose of reconstruction, let's make sure this taxpayers' money is spent effectively, not wasted.

KING: Let me ask you lastly, sir, and this state a step back from the debate over the reconstruction money and look more broadly at the policy.

Over the weekend, tragic news of the missile hitting the Chinook helicopter, more U.S. fatalities in Iraq. What is your sense of where the administration is now? The president says a dangerous place and you must persevere and keep on. Is this White House, this Pentagon doing something fundamentally wrong, in your view?

DORGAN: Well, first of all, we can't withdraw from Iraq. There would be a bloodbath if we did that. It is heartbreaking to hear -- learn of these deaths of American soldiers.

What we should do, and I hope everyone agrees, is to move quickly as quickly, as quickly we can, to make this less of a U.S. occupation and more of an international occupation so that we can get the Iraqi security forces up and operating, and then ultimately be able to withdraw from Iraq.

KING: Senator Byron Dorgan, thank you for your time today.

DORGAN: Thank you very much.

KING: Another prominent Democratic senator has decided not run for re-election. Florida Senator bob graham announced his decision today, just a month after he dropped out of the race for the Democratic presidential nomination.

Graham joins Democratic Senator Zell Miller of Georgia, John Edwards of North Carolina, and Fritz Hollings of South Carolina, who have all said they won't run for another term. The four open seats could play a key role in deciding the balance of power in the next Senate.

Graham says he's confident the Democrat will prevail in the race for his seat.

(BEGIN VIDEO CLIP)

SEN. BOB GRAHAM (D), FLORIDA: We have a very strong group of Democrats running or who have indicated their intention to run for the U.S. Senate. I'm quite confident that the Democratic nominee will be successful next November and will provide outstanding leadership for both Florida and America.

(END VIDEO CLIP)

KING: Mark your calendar. The presidential election is now just a year away. But the nine Democrats running for the White House are already running short of time in their race to become the party's nominee.

If the past year is any indication, it's anyone's guess which Democrat will end up on the ballot opposing President Bush.

Candy Crowley has the report.

(BEGIN VIDEOTAPE)

CANDY CROWLEY, CNN CORRESPONDENT (voice-over): One year away from the presidential election, this much is clear.

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: How are you doing with the economy right now?

UNIDENTIFIED MALE: It's picking up. I've done well. It's a little slow in the summer but now it's crazy.

KERRY: Glad to hear it.

CROWLEY: A year can change anything. A year can change everything.

KERRY: Nobody expected such a situation with the war. These things happen.

CROWLEY: A war turned sour and the economy goes bullish, events have turned the conventional wisdom of politics on its head and back again.

Richard Gephardt has already had a rebirth, prompting a spate of tortoise and hare stories, with Gephardt emerging from the Iowa caucuses as a slow but deliberate Dean slayer.

Last winter's presumed frontrunner is not anymore. Possible scenario, Gephardt beats Dean in Iowa, John Kerry then beats a weakened Dean in New Hampshire. Voila! Comeback kid, the sequel.

KERRY: The people of New Hampshire want to know who can be president. And they want to see anybody who wants to fight for it. I intend to fight for it.

CROWLEY: The most familiar face in the Democratic crowd is languishing. Yes on war on Iraq, yes on the $87 billion, Joe Lieberman struggles in a primary shaped by anti-war Democrats.

SEN. JOE LIEBERMAN (D-CT), PRESIDENTIAL CANDIDATE: I didn't duck it. I didn't play politics. I voted to support our troops and finish the job.

CROWLEY: Lieberman looks for a respectable third in New Hampshire to take him to the more moderate climes of South Carolina, Arizona and Oklahoma, where he becomes the not-Dean candidate. It's a highly competitive position.

John Edwards, yet to make the kind of splash his fresh face promised, looks to survive Iowa and New Hampshire with a pair of thirds and make his play in South Carolina as the not-Dean.

Likewise, Wesley Clark. Passing on Iowa, Clark sees a third in New Hampshire as his ticket to South Carolina, where the state's large veterans population crowns him the not-Dean.

HOWARD DEAN (D), PRESIDENTIAL CANDIDATE: It's the stalker.

UNIDENTIFIED FEMALE: You don't have to say that.

DEAN: You guys are great, thank you.

UNIDENTIFIED FEMALE: Good morning.

DEAN: You guys are wonderful. Thanks for all your hard work.

CROWLEY: This is Dean, last November's asterisk, now a frontrunner with groupies. He has the most money, the best polls, the only pizzazz and a strategy of inevitability.

DEAN: We're going reach out and give three or four million people who didn't vote in the last election or voted for the third party a reason to vote. And when they vote, we're going to have more votes than the president of the United States. And this time the person with the most votes is going to the White House.

CROWLEY: All viable strategies possible scenarios. But the war could go right, the economy could go wrong or some combination thereof. Anything can happen in a year. And it usually does.

Candy Crowley, CNN, Washington.

(END VIDEOTAPE)

KING: The president's campaign pollster is serving notice he expects another close election. In a memo obtained by CNN White House correspondent Dana Bash, pollster Matthew Dowd told the president's campaign managers the race is, quote, "likely to be very tight and go down to the wire," end quote.

Dowd cites what he calls a divided and polarized electorate. Dowd also predicts the president could fall behind in the polls once the Democratic challenger emerges from the pack, but Dowd predicts this traditional bounce will be temporary.

Coming up, "Wasted Minds: Our Failing Schools." Tonight, a growing number of American children are home schooled. But are they better off? Casey Wian will have that report, up next.

(COMMERCIAL BREAK)

KING: Tonight, we begin a series of special reports, "Wasted Minds: Our Failing Schools."

A growing number of families are dissatisfied with both public and private schools and are bringing their children's education home. Tonight we look at the debate over whether this practice of home schooling is helping or hurting our nation's children.

Casey Wian reports from Huntingdon Beach, California.

(BEGIN VIDEOTAPE)

CLAIRE WILHOITE, STUDENT: The fox was left on the sand.

CASEY WIAN, CNN CORRESPONDENT (voice-over): Like most 6-year- olds, Claire Wilhoite is polishing her reading skills but not in class, she's being home schooled.

KAREN WILHOITE, MOTHER: To get back to the fundamentals. You know, now they're so politically correct. They think teach all this stuff that to me is to be taught at home. We're giving them a rich man's education. They have private tutor, you know, versus being in a classroom of 20, 25 30, depending on what grade they're in.

WIAN: The Wilhoites also want religion to be part of their children's education and more control over their choices of friends.

At least a million American children are now being home schooled or about two percent of those aged 6 to 17. While estimates vary, all agree the numbers are growing rapidly, up to 15 percent a year.

The Wilhoites plan to home school all of their children, even though the backyard of their house borders the playground of a public elementary school that is rated among California's highest for academic achievement.

Twelve-year-old Courtney Walker fell behind in both public and private schools.

VICKY WALKER, MOTHER: I paid for a lot of tests. They said that she had ADD. I -- they wanted to give her medication, and at that point, I said, no, absolutely not. I knew there was another -- a better way.

WIAN: They began home schooling this year. Courtney is thriving.

COURTNEY WALKER, STUDENT: It just helped me get further up when I wasn't having all the distractions as I was in school.

WIAN: Home schooling groups offer educational materials, tutors and legal help.

Still, colleges are struggling with admission standards. At USC, home schooled applicants tripled over the past five years.

MICHAEL THOMPSON, DEAN OF ADMISSIONS, USC: We haven't noticed any difference in the way home schooled students fare, as opposed to students admitted from a more traditional sort of educational background. The numbers are relatively small for us, though.

WIAN: That could change soon, because most of the growth in home schooling is among elementary school students.

Casey Wian, CNN, Huntingdon Beach, California.

(END VIDEOTAPE)

KING: We'll continue this series of special reports, "Wasted Minds: Our Failing Schools." Tomorrow, the student population is growing while teachers are disappearing. We look at the resource crisis facing the American education system. That's tomorrow. Please join us.

Tonight's thought is on education. "Education is the movement from darkness to light." That is from psychologist and author Allan Bloom.

A reminder now to vote in tonight's poll. It's about a veteran of the Iraq war who also is an illegal alien. Our question is, do you think Private Juan Escalante deserves to become a U.S. citizen? Yes or no? Cast your vote at CNN.com/Lou. We'll bring you the results a little later in the show.

And coming up, rebuilding Iraq. Our next guest says the Iraqi people should have more control over their country's fate. Former ambassador Timothy Carney worked on the reconstruction effort in Iraq, and he will join us, just ahead.

(COMMERCIAL BREAK)

ANNOUNCER: LOU DOBBS TONIGHT continues. Here again, John King.

KING: The issue of rebuilding Iraq has been at the center of controversy, not only here in Washington, but around the world. My next guest was there at the beginning of the reconstruction effort. And he says the main goal right now should be shifting power to the people of Iraq. He says the United States should make it absolutely clear that this is the priority in Iraq, to shake any suspicion of a hidden agenda.

Timothy Carney is the former U.S. ambassador to Sudan and Haiti. He joins me here now live in Washington.

How, sir, send this signal and shift power at a time when the White House says there is no new constitution, that the Iraqi governing council is not prepared to take power? How do you do this?

TIMOTHY CARNEY, FORMER U.S. AMBASSADOR: You've got to do it with the Iraqis. You've got to get hold of all of the Iraqis who are willing to give you an opinion. That means you've got to have a staff that can get out and talk to Iraqis.

You've get to get as many Arabists as the State Department is able to send out there. And saturate the airwaves with a transparent message from Paul Bremer and the entire coalition provisional authority of all nationalities that we're there, basically, to move Iraq into the 21st Century and their ideas on how that can happen are the most important element of the equation.

KING: You talked about building that trust with the Iraqi people. You were quoted extensively in a Sunday "New York Times" magazine article. The author of that article at the very end comes to this conclusion. He writes, quote, "While occupying and reconstructing Iraq was bound to be difficult, the fact that it may be turning into a quagmire is not a result of fate, but rather a result of poor planning and wishful thinking."

A fair assessment, sir? Did this administration plan poorly and have overly optimistic thinking?

CARNEY: Yes, of course. There's no question about that. But that's not the issue now. The issue now is to not point any fingers. What's important now is to get it right.

And to the administration's credit, at the end of June and early July, Secretary Rumsfeld sent out a team from the Center for Strategic and International Studies here in Washington, D.C., to find out what needed to be done. That team made seven strong recommendations, and those issues of governance and Iraqi participation remain to be successfully addressed.

KING: You talk about sending that team out in June, I think you said.

CARNEY: Late June, early July.

KING: That's after the president, more than a month, almost after two months after the president declared major combat operations over. So obviously some deficiencies there, they acknowledge.

You say in this article this -- the U.S. Military, quote, "simply did not understand or give enough priority to the transition from their military mission to our political military mission."

How could they have gone into this operation, given the experiences in Kosovo and elsewhere, and not have been prepared to turn it over to the reconstruction?

CARNEY: That's a question for history. I frankly don't know. I was amazed and dismayed as indeed my pros at the time suggests. But let me come back to today, the issue is getting it right. That's what we need to do now.

KING: In terms of getting it right, in recent days the White House talked with the national security team about accelerating the pace of getting Iraqis on the front line of security.

One of the first things Ambassador Bremer did when he went to Iraq was make clear that he was disbanding the Iraqi army, some 400,000 people. Now there's some talk of bringing them back, at least some of them back. Was it a mistake then or is it a mistake now to talk about that?

CARNEY: It was a mistake then. There isn't any doubt about it. It was too ambitious and badly conceived. Similarly the -- the all embracing, all encompassing dismantling of the Ba'ath organization and proscribing its -- too many of its members from activities in government was also overdrawn.

Getting it right now is still possible, even though we've lost a lot of time.

KING: You say still possible. You see these pictures, the helicopter down, the attacks on the hotel in Baghdad where Secretary Wolfowitz was staying. What is your sense in terms of Iraqi public opinion, mass public opinion? Does there come a point when the people believe that this resistance to the U.S. might or will succeed, and what is the damming effect, if you will, if that corner is turned?

CARNEY: I see two elements at work here. One is the evolution of day-to-day life. More children in school, more businesses open, more economic life, more electricity.

On the other hand, there is no doubt about an increase in the quality, sophistication and quantity of violence, not only against the coalition, but against Iraqis themselves.

My question is how broad is this accelerated violence? It may be more restricted to the Sunni triangle near Baghdad than in the north and in the south, despite the occasional bomb there.

KING: And sir, if you can travel the 16 blocks and have a few minutes with President Bush and say, "Mr. President, do this one thing tomorrow," what would the one thing be? CARNEY: I think the one thing would be ensure that the coalition can use the media, radio, TV, print, to communicate its vision to Iraqis.

KING: Former U.S. Ambassador Tim Carney, thank you very much for your time tonight and your thoughts.

CARNEY: Thank you.

KING: Thank you, sir.

Tonight's quote is from Fort Carson, Colorado, where four of the soldiers killed in Sunday's helicopter attack were based.

And we quote, "This incident underscores the sacrifices our men and women take every day in defense of our country." That was from Lt. Col. Thomas Budzyna, public affairs officer at Fort Carson.

Coming up, Christine Romans will have the market. And we'll share some of your thoughts on our special series of reports on "Wasted Minds: Our Failing Schools."

Stay with us.

(COMMERCIAL BREAK)

KING: Now the results of tonight's poll question about the veteran of the Iraq war who also is an illegal alien. Do you think Private Juan Escalante deserves to become a U.S. citizen? Seventy- five percent of you said yes, 25 percent no.

On Wall Street today, a solid rally to start the first week of November. The Dow jumped 57 points to close at its highest level in 17 months. The NASDAQ surged 35 to a 21-month high. The S&P 500 added 8.

There was more fall-out today, though, from the investigation into mutual fund misconduct. Christine Romans has the report.

CHRISTINE ROMANS, CNN CORRESPONDENT: State regulators and the SEC told lawmakers the mutual fund industry violated the public trust. Fund managers traded for their own profit, special relationships allowed investors trading privileges and funds failed to enforce rules against moving quickly into and out of funds or trading after hours.

Now, regulators call the abuses widespread. Thirty percent of brokerage firms assisted market timers. Ten percent of mutual fund groups allowed late trading. And the SEC found that about 30 percent of fund firms disclosed their holdings to select clients more often than normal.

New York Attorney General Eliot Spitzer blasted mutual funds' own oversight.

(BEGIN VIDEO CLIP) ELIOT SPITZER, NEW YORK ATTORNEY GENERAL: The boards of directors of the mutual funds have been inert. They have been passive. They have failed. They have utterly failed the investor. They have misunderstood their role. They have not been responsive to the appropriate parties. This must change.

(END VIDEO CLIP)

ROMANS: As the regulators testified, the body count rose.

After 33 years, Lawrence Lasser is out at Putnam Investments. He's the most senior executive to lose his job yet in the scandal.

Richard Strong resigned from Strong Mutual Funds but will remain at Strong Capital. He's accused of market timing to the tune of $600,000 in profits.

And the SEC's Boston chief stepped down as critics wondered why the SEC hadn't detected all this wrongdoing much earlier.

Meanwhile, Morningstar told investors to stop any new deposits into Putnam. Red flags there. The ousted CEO was paid at least $142 million over the past five years. That's a hefty payout for a CEO who presided over the worst public relations disaster in memory and a scandal that's led to $4 billion in redemptions in the past week.

Now, Lasser could be owed millions more. Putnam's parent, Marshall McLennan, is reviewing his contract.

Meanwhile, regulators are set to file fraud charges against six former Prudential brokers for market timing. That could come as early as tomorrow.

John, the SEC and the NASDA are zeroing in on overcharges for mutual funds. They say in just 2001 and 2002, investors were overcharged $86 million for their mutual fund purchases -- John.

KING: Christine, all this focus on violating the trust -- mutual funds, mutual fund managers -- and yet the market is going up. Explain that one.

ROMANS: That's the ultimate irony. Six straight days in a row of a rally for the Dow Jones Industrial Average. And this should be the best fundamental backdrop in years for some of these mutual funds to be operating. But they are really mired here in a public relations disaster -- John.

KING: Christine Romans in New York, thank you.

And now for a look at some of your thoughts.

From Marinette, Wisconsin, "Thank you for drawing attention to our problems in the school system. This is a nationwide problem and if we do not wake up soon, we will be left behind. I shudder to think how many bright, wonderful kids within gray areas are being left behind because of our lack of interest in the school systems." That from Mary Riddell.

And from Anchorage, Alaska, "Thank you for finally exposing a major problem that has existed for years in the manufacturing industry: outsourcing. I have witnessed thousands of jobs lost over the years, and far too many good people put on the unemployment line only to increase the profit margin and corporate payouts." That's from Robert Sharp.

And from Nanuet, New York -- I hope I said it right -- "Great job on your illegal aliens horror stories. Being a veteran with a 'non- compensable' service connected disability and shut out from benefits by the VA's 2003 enrollment decision, my question is, how do I apply for illegal alien status?" That's from Joe Cas.

And from Florida, "I recently saw a report on your program about a soldier who lost a limb and saved the life of another soldier. He seems like an incredible individual with a very positive outlook, regardless of the loss. And yet, all we hear about is Jessica Lynch." That was a note from Joanne.

And that soldier was Army Specialist Robert Acosta. Every week we feature one American hero who has recently returned from combat in Iraq and Afghanistan and faced additional challenges here at home.

We love hearing from you. Please e-mail us at LouDobbs@CNN.com.

And that's our show tonight. Thanks for being with us. Lou will be back tomorrow. He'll be joined by Senator John Warner, the chairman of the Senate Armed Services Committee.

And in "Wasted Minds: Our Failing Schools," a look at America's overcrowded classrooms and overwhelmed teachers. Does Washington have a solution?

For all of us in Washington and in New York, good night.

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